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Red-hot WPI

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Data for March released on Monday showed the country’s wholesale price index (WPI) at 14.55% above its level a year earlier, after a rise of more than 13.11% in Feb. With this, the WPI reading has been in double digits for about a year

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After a worrying rise in retail inflation, India’s latest wholesale price-rise figures look set to exacerbate our monetary policy complexities. Data for March released on Monday showed the country’s wholesale price index (WPI) at 14.55% above its level a year earlier, after a rise of more than 13.11% in February. With this, the WPI reading has been in double digits for about a year.

It is not the primary index guiding the Reserve Bank of India’s (RBI) policy decisions, but it will be hard for the central bank to ignore it, given how dearer inputs can feed regular consumer-price inflation. Concerns of snuffing out already-weak demand in covid times might have kept businesses from raising their price tags. Eventually, though, they will try to pass increased costs on to consumers, which will show up in the measure that RBI must keep in control. Should retail inflation stay above RBI’s 6% upper bound for three consecutive quarters, it would be deemed in breach of its official mandate. Central banks in the West have been caught behind the curve on price stability and are being forced to press on the monetary brakes, risking economic recessions. Let’s hope we’re not in the same quandary.

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